- guardian.co.uk, Monday 21 May 2012 21.00 BST
Britain may well fall into a bad recession if Greece leaves the single currency, as Office for Budget Responsibility boss Robert Chote says (Interview, 19 May). But the costs of Greece staying in would be even higher. The prospect of a continuing cycle of crises, bailouts, defaults and more crises creates a huge uncertainty that leaves businesses unwilling to invest and expand – stifling the growth we need to get ourselves out of debt. To keep Greece in the single currency, European taxpayers would have to write off around €60bn of the bailout loans they have made so far, pump in around €200bn to cut Greece’s €274bn debt to a sustainable size, and carry on subsidising its chronic overspending to the tune of €20bn a year in perpetuity. Better, surely, to get the pain over with so that people can at last invest confidently in the future.
Director, Adam Smith Institute
• The copious analyses of costs and benefits of a Greek exit have barely touched on the human element, and completely neglected the moral one. The Greeks stand to lose all their savings, endure more cuts and see businesses go bust. It is predicted or, more precisely, imagined that the magic wand of devaluation will restore Greece to growth in just a few years. There is no question that the Greek government fiddled the figures, overspent due to cheap credit and mismanaged European funds. The threat of exit from the euro might be a necessary evil to extract structural and political reforms, but is the humiliation of a people required?
The missing factor in the Greek equation is what exit would do to European consciousness. Angela Merkel might believe in the superiority of German technology, economy and work ethic, and give little thought to the origins of these words. She might even believe such economic wealth results from wise investment and hard work, rather than the use of building a massive surplus to the detriment of other economies, the depression of salaries, the bank subsidies to businesses and the current refinancing through cheap interest rates. She has embraced an economic system reliant on uneven development and forgotten the helpEurope received after the war.
If the rule of the mighty trumps Greece’s livelihood, Europe will have chosen the markets over the cradle of its civilisation. It is our responsibility, as rich and “civilised” nations, to prevent human penury, restore dignity and show solidarity.
Francesca ES Montemaggi
Researcher in sociology of religion, school of city and regional planning,
• You rightly headline Robert Chote’s warning that the UK “may never recover” if Greece exits the euro. As this latest phase of the crisis unfolds, the UK is an observer. We wait for the storm to strike. How different things could have been. The 2010 coalition document promised that Britain would play a leading role in the EU. Yet every signal sent to the EU by the government since then, from the referendum bill to the two fingers shown by David Cameron at last December’s summit, has been of contempt and proposed disengagement, thus reducing to nil our ability to influence the decisions that will help to decide whether our own economy sinks or rises.
Cameron knows what has to be done. Yet, friendless outside his own party, he is reduced to pleading weakly with Mrs Merkel to temper Germany’s austerity determination (as if she will take any notice) and belatedly trying to cosy up to Mr Hollande (if only he will abandon his plans for a financial transaction tax). The EU is Britain’s political homeland and our most important export market. The danger of the UK becoming marginalised has long been apparent. Now it’s happened, and at a most inconvenient time for our own failing economy, it’s not much consolation for us pro-Europeans to be able to say we saw it coming.
Chair, European Movement, Tamar branch, Tavistock, Devon
• The start of Ratko Mladic’s trial for war crimes as the euro crisis threatens to spin into a “doom loop” should give pause for thought. After the fall of the Soviet Union, the US effectively told the then European Community that Europe was its backyard and tried to withdraw from interfering. Yet the EC began a period of navel-gazing as the foreign ministers and heads of EC governments obsessed about drawing up the Maastricht treaties and introducing economic and monetary union and the euro. One side-effect was to ignore the Balkans and so help prolong the war, with the consequences Mladic’s trial recalls. Now, with warnings of the danger of Greece collapsing into turmoil, even civil war, EU leaders have to look beyond their economics textbook arguments and confront the real-world consequences of their dithering. It would be a disgusting irony if the euro, the most ambitious project of an EU designed to make war in north-west Europe impossible, were to be book-ended by two civil wars in south-east Europe.
Brighton, East Sussex
• As David Cameron has been chuntering at the G8 summit (Report, 21 May) that cutting and cutting again is the only path to economic salvation, let’s recall previous summits. At G20 in London, chaired by Gordon Brown, countries agreed to both rescue their banks and stimulate their economies, a twin-pronged strategy that worked in Britain, with economic growth returning and unemployment falling up until the 2010 general election. Shortly after that election came the G20 in Toronto, where Cameron and George Osborne, with President Obama weakened by the Republican onslaught, pushed through instead a one-club solution of cutting national deficits, a strategy in Britain that has led to an economy at best flatlining, unemployment only contained because so many people are working part-time, and a double-dip recession. In Europe their strategy, with Angela Merkel its champion, threatens the ruin of Greece, Spain, Portugal and perhaps Italy, and the collapse of the euro. We need a plan B.
• There are usually said to be only two options for solving the present crisis in the eurozone and in the UK: austerity or growth. But greater equality of income and more generous provision of services might provide a better solution. That is, more widely, a rejection of neo-liberal nostrums, and an alternative to growth (We will not recover the euro without re-examining our deepest held beliefs, 19 May).
The situation is so difficult and painful for many because it happened so suddenly, with those below the top of the income scale – particularly those at the bottom – bearing most of the burden. In general, people in western Europe did not feel they were facing austerity in 2000 or in 1990, although GDP in each of those years was lower than now. What makes the present situation different, apart from its suddenness, is its disproportionate impact. Thus many experience a fall in living standards – in some cases catastrophic – while those at the top experience little, if any, decline in income and some continue to receive huge increases. The most important problem, however, is growth. There is a limit to possible global growth and in western Europe there is no need for further growth in GDP – if it is more equably distributed. The issue of austerity v fairer income distribution is political and social. The issue of growth is existential.
• Your economics editor, Larry Elliott, (The flawed euro is ripe for creative destruction, 21 May) rightly notes that Ireland and Spain suffer from having accepted too much private debt. Then he blames this on low interest rates set by central banks. He must know the rates at which individuals, businesses and governments could borrow were low because free global capital markets were awash with savings seeking interest and safety. Low US and UK bank rates helped stimulated their economies. Private and government borrowing and expansionary monetary policy fix the failure of deregulation to sustain global demand.
I attribute this failure to the low wages set by competition in free global labour markets and to the large current account surpluses of some low-wage and oil-producing nations. The resulting surplus savings were attracted by the returns on and readily access to deposits in trusted global banks. Elliott’s criticisms of the euro and EC do not explain why the US is in such trouble. Nor is its willingness to run huge deficits to sustain its beloved global freedoms more sensible than the EC’s determination to curb the deficits as if large nations were similar to small households. Note: some nations tie their currency to the dollar without becoming uncompetitive but are not subsidised by the US treasury. When will Elliott and the Guardian deal honestly with our grave financial and economic problems?
George CA Talbot
• Surely the Greeks have enough to endure without David Cameron giving them advice?